Marina Bay with Suntec City and National Stadium and Kallang in the background.

8/01/2009

New chief at SGX/Building castle on shifting sands

Magnus Bocker has been recruited from New York, the finest financial centre of the new world. He was the President of Nasdaq OMX. I am not going to belabour the foreign talent or lack of local talent debate. I am looking at this appointment and what direction is the SGX heading?
Having a foreign head with a wealth of experience in M & A of stock exchanges, like Chip Goodyears experience in commodities, can we expect that SGX will be heading in this direction, more mergers with other exchanges? The concept is brilliant, as brilliant as the acquisition of huge international banks. The disastrous failure of the latter was due primarily to bad timing as well as buying rotten apples without knowing it. We do not know what we are in for.
In the case of growing SGX into an international financial centre in the league of NY, London or Tokyo, my fear is that we are taking too big a bite that we could not swallow. The way the current stock market is running is a case in point. Without a critical mass, a big and sustainable local fund, and relying on an over representation of foreign funds, we are completely at the mercy of these funds. When they are in, we all laugh to the banks. When they decide to pull out, we will be caught high and dry. There is no escape, and many local investors, no matter how big, will be hanged by the cleaners. Their investments can be totally wiped out. This has been our experience. Are we blind to it and still think that this is the way to go? Think big but not too big.
Or should we take a step back and ask ourselves whether we should know our strength and weaknesses and play at a level that we can manage and control with lesser risk? Look at our football league. This is what we are and where we will be. Don't deceive ourselves to think otherwise unless we are prepared to throw our money away.
The international funds are rich and have plenty of money, but they are very mobile and not only that they will move their funds at will to where the opportunities are, they will exploit the weaknesses of the local market and investors and clean everyone out if they can.
Do not play with danger that we cannot control. The minibond saga, the failed investments in foreign banks and in anything foreign, the Scam chips, Malaysian chips, are painful lessons that we must learn from. We are not smarter than them. If we go this way, the biggest disaster that will come our way will be the collapse of the stock market.

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